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Nicholas Anthony

The Cato Institute’s mission is to originate, disseminate, and advance solutions based on the principles of individual liberty, limited government, free markets, and peace. Within the Center for Monetary and Financial Alternatives, we narrow that scope to the realm of monetary and financial policy. And while our work often involves digging into the weeds to assess the merits of specific pieces of legislation, it’s always important to step back and ask what the subject of our work means for liberty. Today, that subject is financial privacy.

So, what does financial privacy mean for liberty?

An Insight into Your Life

Privacy is foundational for protecting freedom. Abuses to human rights and efforts to control people often depend on governments knowing the intimate details of a person’s life. It’s for this reason that financial privacy is so important. Financial activity can reveal details about a person’s relationships, profession, religion, political leanings, locations, and more. In fact, although the data conversation has often centered largely around social media concerns, financial information can be far more revealing.

Consider the average post on Facebook or Twitter. People will often try to present their “best life” on social media and that might mean filtering photos, embellishing stories, or outright making up an entirely new persona. In economics, we can refer to these actions as “stated preferences.” In contrast, financial activity can offer insight into someone’s “revealed preferences” because, by their nature, financial transactions involve explicit costs. Put bluntly, financial transactions require people to put their money where their mouth is. Someone could post online that they are abroad “on a luxurious vacation,” but their purchases would reveal they are actually at home. Likewise, someone could post about their “humble life in a small town,” but their pay stubs would reveal they are actually a millionaire.

The list of examples goes on, but financial activity reveals many areas of a person’s life so it’s more likely to reveal who someone truly is—even if the person doesn’t want those details known by others.

Over the last 50 years, the volume of personal financial data has increased significantly as payments have increasingly become electronic. Consider the use of credit cards. Less than 20 percent of families had a credit card issued by a bank in 1970, but now the average person has around 3 credit cards. With this rise in access has also come a rise in use: credit cards alone were used for 28 percent of payments in 2021. Looking at the broader landscape, over 70 percent of payments in 2021 were electronic. Whether it’s when using a credit card on a shopping trip or a mobile app to pay friends, people now leave a digital trail with the payments they make nearly everywhere they go.

The Potential for Abuse

Unfortunately, you do not need to look far to see how governments around the world use financial data and the financial system to control people. And it is clear that where privacy acts as a limit on government power, a lack of privacy can lead to an abuse of that power. Let’s consider just a couple of examples from recent years.

In China, many people used cash to purchase train tickets during the 2019 freedom protests. Although the Chinese economy has largely adopted digital payments more than other countries, protestors turned to cash in this instance out of fear of what a train ticket on their bank statement might mean for them in the future. For all the convenience tapping a card might offer, people feared repercussions from being permanently linked directly to the protests. These fears were not unfounded. The Hong Kong police said that a card is “like a GPS system because it can locate where and when the holder uses it.” Many of those that supported the protests were later targeted and had their finances frozen.

In Canada, protests erupted over the COVID-19 lockdowns in 2022. However, those protests were brought to a halt when Prime Minister Justin Trudeau invoked the Emergencies Act to freeze the bank accounts of those involved in the protests without acquiring a court order. In just one week, more than 200 bank accounts were frozen in an effort to crack down on the protests. At the time, Ottawa’s police chief, Steve Bell, said, “If you are involved in this protest, we will actively look to identify you and follow up with financial sanctions and criminal charges. This investigation will go on for months to come.”

So in both autocratic and relatively free countries, it’s not difficult to see how financial surveillance can quickly translate to financial control. With that said, the United States is supposed to be different. What was written in the Fourth Amendment to the U.S. Constitution should protect financial privacy and limit government power. However, financial privacy has been slowly disappearing for over 50 years under the Bank Secrecy Act and third‐​party doctrine. Although Americans have been caught off guard when cases of financial surveillance occur, it should not be a surprise given the erosion of financial privacy that has occurred over time. And to make matters worse, it seems some policymakers are eager to continue this trend with the introduction of a central bank digital currency, or CBDC.

Conclusion

So, what does financial privacy mean for liberty? From where you travel to what you donate to, financial activity can paint a detailed picture of a person’s life. Having financial privacy means being able to have control over who gets to see that picture and what purposes it may be used for. Privacy is not about having something to hide but rather privacy is about having control over your life. It is for that reason that financial privacy is foundational for protecting freedom.

To read more about financial privacy in the United States and the need for reform, read my latest policy analysis: The Right to Financial Privacy.

Paul Matzko

This global public opinion poll asking respondents whether they have a favorable view of the USA has been bouncing around the interwebs. The topline finding — the US is pretty popular! — surprised many American cultural critics who remember the bad old days of the Iraq War when global criticism of US imperialism surged.

I find the handful of countries where the opinion of the US remains more negative just as interesting. Hungary’s worst‐​in‐​Europe result is amusing given how the far Right in the US fetishizes Viktor Orban’s reactionary politics. American Hungary stans suffer from sublimated self‐​hatred, wishing they could be as xenophobic and culturally chauvinist as team “Make Hungary Magyar Again.”

But the other outlier country on this list with a marked dislike of the US might be more of a surprise to Americans: Australia. We’re almost underwater Down Under. This is in sharp contrast with how highly Americans think of Australia; if you combine all positive responses from this survey, Americans consider Australia their warmest ally. Which means the gulf between how Americans and Australians view each other would be one of the widest in the world!

As it so happens, I spent eight summers as a teenager living in Australia. That certainly doesn’t make me a country expert — and it’s been two decades since I was last there — but it does mean that Australian antipathy towards the US doesn’t take me by surprise.

That dislike was very much on the surface when I was a 10 or 11 year old trying to make Aussie friends. The most popular country singer in Australia at the time was the man, the legend, John Williamson. I’ve written about Australian country music elsewhere, but I can still sing many of Williamson’s top hits from memory, including his rip‐​roaring nationalist anthem “A Flag of Our Own” (1991). Williamson was a republican, which meant that he believed Australia should leave the British Commonwealth, reject the monarchy, and take the British stripes off the Australian flag. Here’s the song’s chorus:

‘Cause this is Australia and that’s where we’re from
We’re not Yankee side‐​kicks or second class P.O.M.s
And tell the Frogs what they can do with their bomb
Oh we must have a flag of our own

Let me decipher that for you. P.O.M.s stands for “Prisoners of Her Majesty,” or Brits, which is often amended with an adjective such as “whingeing POMs” to describe those who yearn for ye olde country and constantly complain about Australia’s supposedly backward ways. This was a particularly popular complaint in Australia in the aftermath of Australia’s 1975 constitutional crisis. The Australian Governor‐​General — a crown appointee in a mostly symbolic role — had invoked a long neglected royal power and replaced the elected left‐​wing prime minister with a conservative. (For comparison, imagine the hoopla if King Charles III were to kick British Prime Minister Rishi Sunak out of office and install a Labour prime minister!)

“Frogs,” of course, are the French, who were on the radar of Aussie nationalists in the 90s for conducting nuclear testing in their Polynesian colonies — which Australia considered its own backyard — and doing so without regard for the effects of nuclear fallout on surrounding islands and Australia itself.

That leaves us with Yankees, commonly shorted to “Yanks,” which quickly becomes, via Australia’s penchant for rhyming puns, “Septic Tanks,” or then shortened further to “seppos.” (Aussies are world leaders in slang. It’s like if Cockney wasn’t just the lingo of one neighborhood in London but had been exported en masse via prison ships, transported to the other side of the globe, and then had taken over an entire continent. Oh wait…)

Maybe you’re wondering why America made that opprobrious list alongside the POMs and Frogs. We weren’t testing any nukes in the Pacific (at least, we hadn’t for a while) and we weren’t meddling in their domestic politics (though blaming the CIA for the 1975 constitutional crisis remains popular among Aussie conspiracists).

But when this song was released in 1991, the Australian military had just participated in the US‐​led Gulf War. Although suffering no combat casualties, Australian nationalists saw this as yet another example of Australia blindly serving the interests of foreign superpowers, from dying at the command of callous British generals in the trenches at Gallipoli — the subject of a 1981 blockbuster starring a young Mel Gibson — to the failed fight alongside the Yanks in the jungles of Vietnam.

Bear in mind that Australia’s anti‐​Vietnam War protests in 1970 were the *largest* protests in their history; by contrast, the much feted anti‐​Vietnam war protests in the US don’t even crack our top 27! Australia’s involvement in the Iraq War did little to assuage critics who believed Australia should stop playing second fiddle to the US, especially after leaked documents showed that the Aussie government’s primary purpose for sending troops was to cozy up to the US. All the talk about eradicating weapons of mass destruction and promoting democracy was merely “mandatory rhetoric.”

However, when I was a teenager in Australia in the late‐​90s, especially while visiting rural communities in Northern Queensland, the complaint I heard the most often revolved around US trade policy, specifically US tariffs on the import of Australian lamb meat. I remember riding around the bush in a ute (flatbed pickup truck) with a local farmer who was spitting mad about US tariffs and who said that the Monica Lewinsky scandal was Bill Clinton getting his just desserts for harming Aussie sheep farmers. What a thought! Australian headlines from the time were simply scathing in their critique of Clinton’s hypocrisy in signing a free trade deal with Canada and Mexico while slapping new tariffs on Australia.

Yet other than the mad cow panic, meat import policies — let alone veal tariffs, lol — have never been a major political issue in recent US national politics. But they sure mattered a great deal to Australia, which is the second largest sheep exporting country in the world (Australia and New Zealand combine for an incredible 93% of the global market). In any case, US trade policy in the 1990s fit with Australian nationalists’ broader critique of the US as a bully who simply expected Australia to meekly comply with its broader geopolitical agenda regardless of whether it was in Australia’s own national interest.

So Australians’ mixed opinions regarding the US are grounded in real, pragmatic considerations. It’s yet another situation in which our imperial entanglements and trade protectionism have provoked blowback.

It’s possible that in the future those feelings might revert towards the more US‐​positive, Australasian mean given Chinese economic and military expansionism in the region. Up until now, Australia has been insulated from the downside risks of Chinese expansion — funnily enough, the intervening Indonesians have been a more significant target for Australian jingoism — while benefitting greatly as a supplier of raw materials for the post‐​Mao Chinese economic miracle. Until the pandemic, Australia hadn’t experienced a recession in nearly thirty years (!).

On a more speculative note, if Noah Smith and other India boosters are correct, Australia’s role as a potential trading partner with India could matter as much for that country’s success as its trade with China has for the past three decades. Last year, Australia signed a new free trade deal with India and expects its exports to triple by 2035. And given the ongoing decoupling of global investment from the Chinese market, Australia could benefit from a major boost of foreign investment given its proximity and ties with India, Vietnam, and other high growth South and Southeast Asian markets (nicknamed “Altasia”). There’s little in the way of Australia enjoying another thirty years of torrid economic growth.

The US should forge a new, peer relationship with Australia, signaling that it takes Australia seriously as a vital regional ally rather than treating it as a junior partner in our foreign misadventures. We have a golden opportunity to do so right now. As Doug Bandow has noted, China has foolishly kicked off a trade war with Australia, and while Trump considered following suit with new tariffs on Australian exports, he was finally persuaded not to. We should take advantage of China’s mistake by expanding our 2005 free trade agreement with Australia and lower rates on agricultural products that are feeling the pinch from Chinese tariffs.

This is a crosspost from the author’s Substack. Click through and subscribe for more content on the intersection of history and policy.

Marc Joffe

After numerous delays and extensive cost overruns, Honolulu’s Skyline passenger rail system launched on June 30. Skyline is the first U.S. system to use automated trains, hopefully serving as an example to the nation’s other urban transit operators. Driverless train technology is common in Canada, Asia, France and at U.S. airports. They offer lower costs and the potential for more frequent service.

Skyline opened with five days of free service through July 4, when daily ridership peaked at 18,108. The elevated train system with its unique views proved to be something of a tourist attraction during the holiday weekend. But when Skyline began to collect fares on Wednesday, July 5 ridership plummeted to only 1,245. The city expects that after a year, daily ridership will stabilize in the range of 8,000 to 10,000.

All of this is a far cry from original projections. The project’s 2010 Environmental Impact Statement projected that ridership would reach 116,300 in 2030. As late as 2018, Honolulu officials were offering aggressive ridership projections of up to 121,600 per day in 2030.

One reason that today’s ridership is so far below the old forecasts is that only a portion of the system is now in service. The 2030 ridership projections applied to the full 20‐​mile, 21‐​station system originally planned. The phase that just opened encompasses the easternmost 11 miles and nine stations. The two westernmost stations have been dropped from the project to contain cost overruns.

But much of the gap between real and forecast ridership levels is attributable to excessively optimistic modeling assumptions. As recently as 2020, the city thought daily ridership on the initial nine‐​station segment would by over 19,000 or double the city’s latest prediction.

A longtime critic of Honolulu’s transit plans, University of Hawaii Civil Engineering Professor Panos Prevedouros, previously offered a projection for the full system that was also about half of official forecasts. He came to this conclusion after seeing a decline in Honolulu bus ridership as well as very low ridership on Tren Urbano, a similar rail system in Puerto Rico.

Aggressive ridership forecasts are not unique to Honolulu. Earlier in 2023, San Francisco’s $2 billion, 1.6‑mile Central Subway began revenue service with a far lower number of passenger boardings than originally anticipated.

Had ridership projections been more realistic, perhaps Honolulu would have opted to serve the route with Bus Rapid Transit (BRT) instead of rail. Individual BRT vehicles can accommodate up to 300 passengers and BRT lines in several international cities handle a peak load of over 10,000 passengers per hour. In the US, the Los Angeles Metro G Line served about 30,000 passengers daily at its peak before the pandemic. If the LA line was grade separated and not impacted by traffic signals, its capacity could be far higher.

Not only does BRT have adequate capacity for the Honolulu Skyline, its use would not have had a major impact on travel times. While trains have much higher maximum speeds than buses, this difference is only material when stations are far apart. On the Skyline, stations are no more than a couple of miles apart and trains will achieve a maximum speed of only 55 mph.

Had Honolulu opted to run large buses rather than trains along the elevated Skyline, it could have started service far sooner and at much lower cost than with a rail‐​based solution. And a less aggressive, more realistic ridership forecast may have led to the conclusion that Skyline was best served by BRT. For other local governments considering new transit services, Honolulu’s lessons are worth considering.

Erec Smith

There is no such thing as a panacea; few things are actual cure‐​alls in themselves, especially when it pertains to social issues. However, the closest thing to a panacea for contemporary social injustice—both actual and perceived—is the concept of individualism. It is the closest foil to what is, arguably, the most dangerous aspect of critical social justice activism: race fatalism, i.e., the idea that especially minoritized groups have no locus of control and are at the mercy of their hegemonic oppressors.

Unfortunately, too many social justice activists embrace this fatalism and, both implicitly and explicitly, demonize individualism as an inherently oppressive, white supremacist concept.

Race fatalism cannot exist without the idea that all people from a given race experience the world similarly (race essentialism), and that we are forever defined by our home environments (linked fate), concepts that could not be more opposed to individualism. Thus, to embrace individualism is to relinquish faith in the fundamentals of critical social justice.

Fortunately, when individualism destroys these fundamentals steeped in powerlessness, it gives birth to agency and freedom conducive to an empowered and fulfilled life.

The most egregious aspects of critical social justice activism—now wryly and/​or disdainfully referred to as “woke” activism—can be considered footnotes of fatalism: skin‐​color and or gender determine if you are a perpetual oppressor or a perpetual victim; racism will never go away and can only be managed; black kids can’t learn math like other kids; all people who look the same or live in the same area are bound to a particular outlook and particular fate. All these suggest the “truth” of race essentialism, that racism is always already present, and that even words, if coming from an oppressor, are literal violence.

The power of this fatalism is weakened by the concept of methodological individualism, what can be understood as an embrace of free will with an acknowledgement that we live an interdependent existence, i.e., “no man is an island.”

In recent essays, I describe such individualism as an antidote to race essentialism and linked fate. In “Individualism is a Social Justice Issue,” I insist that the embrace of individualism can enhance racial justice through its implied refutation of linked fate and its conduciveness to defensive confidence.

Regarding linked fate, I write, “linked fate denotes the use of the social standing of a group as a proxy for one’s individual identity, i.e., an individual’s fate is inevitably and intricately linked to that of the group. Any individual that seems to escape this fate is considered an exception.” Linked fate depends on the debunked stimulus‐​response theory in behavioral science: the idea that people who share the same race or culture experience the world the same way. Senator Tim Scott’s passionate rebuttal of linked fate focuses on the idea that educational reform is the thing that can unlink fate most efficiently and instill a sense of agency in students, a sentiment elaborated upon by Ian Rowe.

Agency, or “agential fate,” a concept of individual efficacy I support in “Ditching Our Discourses of Doom” (excerpted here), “can be construed as a confluence of pre‐​established circumstances—one’s life experiences—combined with free will.” This concept necessitates the belief “that each individual in a particular context may react to stimulus in different ways; that they each may have a different desired future state; and that their decisions and choices matter in relation to achieving those future states, we enter into a place of agency, possibility, and hope.”

This agency, possibility, and hope imply the concept of defensive confidence I reference in a recent Discourse article. If people have defensive confidence—the confidence that one can successfully defend one’s ideas in given situations—they are more likely to engage the world more courageously as individuals unbeholden to a group and is, ironically, more likely to have one’s mind changed precisely because of this willingness to engage.

These concepts suggest the benefits individualism can have to a sense of social justice and, especially, in combatting the fatalism of social justice activism. Individuals can think independently, adapt to circumstances, and, therefore, more effectively exercise agential fate and defensive confidence, thus better ensuring an attempt to communicate across differences.

Sadly, the concept of individualism is almost anathema in critical social justice circles, in which group identity is favored and individualism is considered an oppressive concept. Race essentialism, which implies concepts like linked fate and group consciousness, is a foundational concept in critical social justice that is diametrically opposed to individualism.

Individualism is not only the best thing for curing the ills of social injustice; it is also, by nature, the downfall of critical social justice ideology. For this reason, maybe “panacea’s” more colloquial synonym, “magic bullet” would be more apropos.

Jeffrey A. Singer

In July 2021, Arizona lawmakers took a small step in the right direction by allowing women to obtain self‐​administered hormonal contraception directly from a pharmacist providing a state or county public health official licensed to practice medicine issues a “standing order” that effectively makes them the prescribing clinician. Thus, Arizona joined its neighboring states of Utah, New Mexico, Colorado, Nevada, and California in fashioning workarounds to the Food and Drug Administration barring women from obtaining contraceptives unless they get a permission slip from another autonomous adult (i.e., state‐​licensed health care practitioner).

Yesterday, Arizona Governor Katie Hobbs took the state a step further in the right direction by issuing an executive order enabling women to go directly to pharmacists to purchase self‐​administered hormonal contraceptives. While the American College of Obstetrics and Gynecology (ACOG) and the American Academy of Family Physicians (AAFP) don’t think it is necessary, the executive order requires that pharmacists perform screening and blood pressure evaluations on women before dispensing contraceptives.

Despite the recommendations of ACOG and AAFP that women of all ages have access to over‐​the‐​counter contraception, the 2021 Arizona standing order law only pertains to women over 18. The governor’s executive order likewise only applies to women over 18. This means younger women still must see a doctor to get a prescription, likely involving their parents in the process—which is not an effective way to cut down on unwanted teen pregnancies.

Ironically, the FDA has allowed emergency contraceptives, also called “morning after pills,” to be available over the counter for women of all ages since 2014.

Blogging about Arizona’s new standing order law in 2021, I wrote:

I have argued that standing orders can be an effective way to bring interim relief to people blocked from exercising their right to self‐​medicate. But the operative word here is “interim.” Standing orders have a lot in common with executive orders. They are issued by an executive branch official—in this case, a public health official who holds a state health care practitioner’s license—and are usually time‐​limited. Furthermore, standing orders remain in effect as long as the public health official wants them to, and only if the following public health official is a licensed health care practitioner and decides to renew them. (Even worse, public health officials are not always licensed health care practitioners.) Since most public health officials answer to the chief executive, the security of standing orders is at the mercy of administration policy.

In my commentary, I urged Arizona lawmakers to pass legislation to expand the scope of practice of licensed pharmacists. Several states have used this approach to work around the FDA’s prescription requirement. Such an approach immunizes the reform against changes in the attitudes of public health officials or governors.

Though she should have applied it to women of all ages, Governor Hobbs should be commended for her effort to expand access to hormonal contraceptives. However, unless Arizona lawmakers authorize pharmacists to prescribe contraceptives, the governor’s accomplishment can be erased by her successor.

Of course, the ultimate solution is for the FDA to “free the birth control pill” so that women of all ages can exercise their autonomy to self‐​medicate.

Jennifer Huddleston

Meta launched a new text‐​based social media app called Threads on July 5. The app—which is connected to Instagram—has been referenced by both the media and users alike as an alternative to Twitter. There is much excitement about the latest social media app and Threads tells us a lot about the dynamic nature of the social media marketplace and the potential impact of regulations aimed at leading technology companies.

Threads Illustrates Social Media Remains Dynamic

There has been much handwringing about whether today’s social media giants are monopolies. Threads illustrates that there are new entrants into the market and, at a minimum, that there is continued competition between even the most successful tech companies.

Elon Musk’s takeover of Twitter was met with applause by some, but left others searching for alternatives following his changes to the product, including the loss of certain features without paying for a monthly subscription to Twitter Blue and changes to content moderation policies. To at least some users, Threads appears to provide an alternative with a similar text‐​focused experience. Some may have avoided leaving for new social media apps out of concerns about a steep learning curve or a requirement to rebuild one’s connections on a new app. Threads’ connection to Instagram allows existing Instagram users to port over their connections from a platform that they are already comfortable with.

Still, Threads and Twitter are not the only text‐​based social media apps available to consumers. New competitors, including Blue Sky and Mastodon, continue to emerge as alternatives for those dissatisfied with current social media options. While Threads may be tied to an existing social media giant, it is only one of many alternative platforms that are competing for popularity in this format. These platforms all benefit from the United States’ light touch approach to regulating social media platforms, giving way to innovative and entrepreneurial efforts toward launching new social media products. This latest launch shows that social media remains dynamic not only with new ideas, but with new products that build on the popularity of certain formats.

What Threads Shows about How Regulation Can Prevent New Entrants

Generally, the European Union (EU) has taken a more stringent regulatory approach to a variety of technology policy issues. These regulations can stand in the way of new entrants being able to enter the market. Though over 30 million users downloaded Threads within a day of its launch, a considerable swath of consumers did not have access to the app.

Regulatory concerns have prevented Threads from currently being available in the EU, unlike its United Kingdom and United States counterparts. The Digital Markets Act (DMA) looms large in this decision, as there remains much uncertainty around its future impact on big tech companies like Meta. DMA restricts how data can be shared between platforms, having an immediate effect on an application like Threads that imports user data from Instagram. The vagueness of the DMA produces extra hurdles to entry that Meta may not want to jump over until the company has more clarity around how to comply with this recently enacted act and whether their adherence is worth the effort.

Unfortunately, the United States has considered similar policies that would change the existing consumer focus from antitrust to something that allows far more government intervention in competitive markets including social media. For example, had the Ending Platform Monopolies Act (H.R. 3825) passed in the last Congress, it could have complicated Meta’s U.S. launch of Threads by limiting its integration with the already popular Instagram platform—a feature that gave rise to the instant popularity of Threads.

The FTC’s aggressive antitrust scrutiny of tech companies could also deter those companies from launching new products or force them to focus on ongoing litigation instead. For example, the antitrust scrutiny of Microsoft in the late 1990s and early 2000s was a deterrent in its development of a mobile operating system. Microsoft co‐​founder Bill Gates said in 2019, “There’s no doubt the antitrust lawsuit was bad for Microsoft, and we would have been more focused on creating the phone operating system, and so instead of using Android today, you would be using Windows Mobile if it hadn’t been for the antitrust case.” With the FTC engaged in multiple actions against Threads’ parent company Meta, it’s a relief that the company was still willing to launch this new product in the United States. One can’t help but wonder what other products or services from various innovative companies might be waiting or lost out of wariness or the need for direct resources to ongoing litigation instead.

Is Threads the Next Twitter?

For all the excitement and optimism around the Threads launch, some solid caution is also needed. Given the wide array of social media options out there, Threads will have to solidify an audience of users after the immediate novelty of a new platform wears off. It is unclear how its use may fully evolve within Instagram or if ultimately the platform may become an entirely separate form of social media.

While much of Threads is Twitter‐​like, the platform also has unique features, namely the ability to post videos up to five minutes long. In addition, unlike Twitter after the launch of Twitter Blue, all users have access to a longer character count of 500 characters. This may attract a distinct type of content and conversation that separates Threads from other sites. While connection to an existing common tech company may help, as the case of Google’s failed social network or Twitter’s defunct Vine illustrates, it does not guarantee a home run.

Threads does, however, show that new social media platforms can quickly gather public excitement and consumers are not locked in to only the existing options. The question of if Threads becomes the next big social media app should stay firmly in the hands of consumers and not government regulators.

Scott Lincicome

Industrial policy is a pillar of President Biden’s economic agenda (aka “Bidenomics”), and the White House recently cited a spike in U.S. manufacturing construction spending to show that billions (perhaps trillions) of dollars in new federal subsidies for “clean energy,” semiconductors, and other preferred industries—enacted in the infrastructure law, CHIPS and Science Act, and Inflation Reduction Act—are “working.” As I noted in a recent column, however, there are many reasons to remain skeptical of these subsidies’ overall economic benefits, even assuming they’ve actually encouraged new private investments in supposedly “strategic” goods. A new report from the Wall Street Journal provides a real‐​world cautionary tale in just this regard:

New York state paid to build a quarter‐​mile‐​long facility with 1.2 million square feet of industrial space, which it now owns and leases to Tesla for $1 a year. It bought $240 million worth of solar‐​panel manufacturing equipment. Musk had said that by 2020 the Buffalo plant each week would churn out enough solar‐​panel shingles to cover 1,000 roofs.

The Tesla solar‐​energy unit behind the plan, however, is averaging just 21 installations a week, according to energy analysts at Wood Mackenzie who reviewed utility data. The building houses some factory workers, but also hundreds of lower‐​paid desk‐​bound data analysts working on other Tesla business.

The suppliers that Cuomo predicted would flock to a modern manufacturing hub never showed up. The only new nearby business is a Tim Horton’s coffee shop. Most of the solar‐​panel manufacturing equipment bought by the state has been sold at a discount or scrapped.

A state comptroller’s audit found just 54 cents of economic benefit for every subsidy dollar spent on the factory, which rose on the site of an old steel mill. External auditors have written down nearly all of New York’s investment.

I highly encourage you to read the whole thing, which provides an almost textbook case for why we should continue to question U.S. industrial policy initiatives, whether part of “Bidenomics” or any other political agenda. All too often, the subsidies’ seen benefits are swamped by their unseen costs—especially after you consider alternative policies that could have achieved the same objectives with fewer taxpayer dollars and lower economic or geopolitical risks.

As I wrote last month about that U.S. construction spending surge and the “strategic” projects it’s supporting, “[m]aybe our grand, subsidy‐​driven ‘industrial transition’ will be worth it in the end (outside of favored industries, the sector is today struggling mightily), but declarations of victory at this stage are absurd.”

The Tesla factory in New York once again shows why.

Colleen Hroncich

“I’m not happy in my position as an educator at a school, and my son’s not happy going to school.” When Iman Alleyne realized this, her next thought was “What can we do?” This question ultimately resulted in Kind Academy, a microschool in Coral Springs, Florida.

Iman had looked for a play‐​based preschool for her son without much success. “I chose the closest thing that I thought was play based,” she recalls. “But even there, developmentally, there were moments where I saw things that just didn’t make sense—like forcing three‐ and four‐​year olds to write three sentences before they could go play.”

Similarly, she saw things she disagreed with at the school where she was working. She was particularly troubled by mandatory silent lunches and kids losing recess for misbehavior. To Iman, these were the kids who really needed recess for a chance to burn energy during the school day.

She pulled her son from his school at the end of the school year and began homeschooling him. “I started getting into the homeschooling groups, and I quickly recognized that this is the way education should be done. The kids were interested. The parents were engaged in their kids’ learning. Everything was very passion based,” says Iman.

Since she’d been conventionally trained, Iman was shocked by some of what she learned from the other homeschoolers. “They would tell me things like ‘you can just do school for an hour a day, maybe 45 minutes for kindergarten.’ My mind was blown by the things that these homeschoolers were doing,” she says. But Iman’s experiences were also beneficial to the homeschoolers, and some started asking her to help them plan their children’s educational paths. Before too long, Kind Academy was born.

In creating Kind Academy, Iman incorporated the best parts of what she’d learned in her education career and from homeschoolers—and left out the parts she found objectionable. There’s also a strong Montessori influence. Children are in mixed‐​age classrooms with a good degree of choice and freedom of movement throughout the day as they learn through discovery.

The school day generally starts with unstructured social time and then moves to a morning meeting where they discuss their goals for the day and what’s happening that week. They also talk about the character trait they’re focusing on that month. “We focused on assertiveness during the last month of school—learning how to speak up and how to ask for things, but in a way that is appropriate,” Iman explains.

The students then shift to academics, with every student working through an individualized learning path. “In the beginning, they take a diagnostic so we see where they are. So no two kids are really doing the same thing. Even the curriculum might be different for different kids,” says Iman. “We also put them in small groups where they’ll do personalized learning—it might be a one‐​to‐​three or one‐​to‐​four ratio with kids who are doing similar things for math, writing, and reading.”

After academics, they do project‐​based learning, which is usually an enrichment activity in things like nature, art, play, science, or stem. The children take a field trip nearly every day. They usually go to a nearby park, but they’ve also visited forests, wetlands, and a nature preserve. To wrap up the day after the field trip they have quiet time, which usually means reading, puzzles, or games.

To support parents and kids during COVID-19, Iman started offering virtual classes. “Probably within a week we went online. First we started teaching our circle time online, and then within about two weeks, we started sending out kits to everybody. We put all of our sensory, nature, art, play, math activities, and reading activities into a box, and we shipped it to parents or they came and picked it up,” Iman says.

When she began offering classes on Outschool​.com, Iman says it took off. “We went global, where we had families coming in from all over the world and seeing what we did. We did a lot of our same classes that we were doing in person, but then we started doing a lot more for older kids. Middle school is where we exploded.” At its peak, she had 3,000 kids from around the world taking Kind Academy classes during COVID-19.

Iman now offers Kind Online School as well as individual classes on Outschool. She’s also started a “Launch Your Kind” program to help education entrepreneurs open their own Kind Academies. Through that, she offers support with curriculum, marketing, enrollment, payment systems, and more. She currently has 10 “baby” Kind Academies planning to open for the upcoming school year—seven in Florida and three in other states.

When asked what advice she has for others considering a similar path, Iman points to the three Ps: passion, purpose, and a plan. On the planning front, she says, “Try to find a way to make an income. A lot of people jump into it right away and don’t have any sort of idea of how they’re going to earn income. In Launch Your Kind, I always stress budgeting—going in there and understanding that it’s going to cost money to do things.”

Iman has a new Launch Your Kind cohort starting July 27, 2023, so it’s a great time to check it out if you’ve been considering starting your own microschool.

Jennifer Huddleston and Gent Salihu

Prior to the 2022-2023 legislative session, five states (California, Virginia, Utah, Colorado, and Connecticut) had passed consumer data privacy laws, but now the patchwork of state laws has more than doubled. Congress has continued to debate a potential federal standard with the American Data Privacy Protection Act in the 117th Congress being the first such proposal to be voted out of a committee; however, without momentum around a federal standard and with continuing and new concerns about data privacy from consumers, many states are undertaking their own policy actions around data privacy.

The patchwork nature of these individual state laws can potentially amplify compliance costs for businesses operating across different states and create confusion among American consumers whose digital footprint often crosses state borders. The potential financial impact of complying with 50 distinct state laws could surpass $1 trillion over a decade, with a minimum of $200 billion being borne by small businesses. As this patchwork grows, what does data privacy look like as the 2022-2023 legislative session comes to a close?

What happened with data privacy in 2022-2023?

As of 2023, the majority of states have considered data privacy legislation, likely in response to consumer concerns on this issue — 32 state legislatures have kicked off the debate and presented bills. Ten states have already signed comprehensive privacy bills into law. Six states—Florida, Indiana, Iowa, Montana, Tennessee, and Texas—enacted data privacy legislation this year. Oregon is the latest state to pass a comprehensive law, which is now awaiting the governor’s signature. Additionally, there are five more bills under consideration as of July 2023. Most of these bills share similarities with the existing data privacy laws in California, Virginia, and Utah.

States with data privacy acts enacted in 2023 that have followed the California model

Of the five additional states that enacted data privacy laws this year, Indiana and Montana appear to most closely resemble California’s model, which relies heavily on administrative rules. Montana, for example, even goes beyond California by creating a right for consumers to revoke their consent to data processing. None of the states that have enacted laws this year have created a private right of action as seen in a limited capacity in the current California law.

States that have followed the Virginia or Utah model

Notably, a growing number of states have passed or considered a data privacy framework that more closely resembles the laws initially passed in Utah and Virginia. This includes Iowa, Tennessee, and Texas as well as a bill still under consideration in North Carolina. Such models provide baseline protections but typically have fewer obligations or areas of covered data, limit enforcement to the attorney general, and are more likely to provide safe harbors.

Still, each proposal remains unique. For example, Tennessee became the first state to create a compliance safe harbor for companies complying with National Institute of Standards and Technology (NIST) standards. Other states have considered similar carve-outs for existing standards. Such an approach may lessen some problems with the patchwork by providing a way for a single set of best practices that could be compliant from state to state.

Notable privacy bill trends to watch

In addition to the growing patchwork of state privacy laws, this latest legislative term has also provided additional information about the debates around data privacy legislation. Notably, private rights of action continue to raise concerns and may make proposals less likely to succeed. Additionally, a new trend of health privacy-focused bills is emerging at the state level.

Currently, four states that still have active bills—Maine, Massachusetts, New Jersey, and Rhode Island—contemplate creating a private right of action. However, to date, all bills from Hawaii to Mississippi to New York that included provisions on the private right of action have failed. New York’s failed “It’s Your Data Act” had foreseen that consumers “need not suffer monetary or property loss as a result of such violation in order to bring an action for a violation.” The Washington Privacy Act was passed only after eliminating the private right of action, which was later reinstated in a very limited form by allowing a private right of action only for injunctive relief without monetary damages.

The inclusion of a private right of action for statutory violations so that individuals can sue companies without the need to prove that actual harm inflicted upon them has grave consequences. Such private right of action for statutory damages raises significant concerns about how litigation could be used to prevent innovation. While a private right of action wouldn’t pose any significant issues if the burden of proof was solely tied to demonstrating the harm, the problem arises when there’s no requirement to prove harm. Such a provision could prompt a surge in class action lawsuits, thereby impeding innovation, especially among small companies that may become more risk-averse for fear of being sued.

The United States, with its distinct litigation system, and features such as the absence of a “loser pays” rule, is more susceptible to the abuse of the private right of action for statutory violations. Illinois’s Biometric Information Privacy Act provides such a right in the context of certain collection of data and has seen everything from photo tagging to trucking companies be sued. Most of the resulting funds have gone to attorneys, with limited amounts to the class members alleged to be “violated” by the action. In the photo tagging case, Facebook was directed to pay $650 million without the necessity of demonstrating any harm. In the trucking case, truck drivers secured a $228 million judgment because, as employees, they were required to scan fingerprints to confirm their identity, again without the need to show actual harm.

A new emerging trend to watch is the ongoing debate surrounding the sponsorship of bills aimed at regulating consumer health data, primarily focusing on reproductive health data. Washington is the first state to pass such a law, which is set to take effect in 2024. In a post-Roe context, it is likely that similar legislation — particularly in blue states — will emerge, regulating actors that are not governed by HIPAA. Given the broad scope of what is classified as health data, debates on its definition, collection, and usage are likely to be heated. Such laws also raise unique compliance questions for a variety of popular apps that are not regulated as medical devices but provide consumers with empowering ways to track information from blood sugar to mental health.

What do state data privacy laws mean for consumers, innovators, and the federal privacy policy debate?

States are acting on data privacy in part because of the continued interest in the issue from constituents. In 2022, more than 80% of voters polled supported the idea of a federal data privacy law. Given that data privacy remains a concern and due to the lack of progress on a federal bill, it is unsurprising that much of the debate over data privacy has shifted to a local or state level where legislatures are able to move more quickly. But is this good for consumers and innovators?

Is there a case for data privacy legislation anyway?

While many polled consumers are in favor of data privacy legislation, there remains a great amount of difference in the actual privacy preferences they have. In fact, the overwhelming support for data privacy becomes far more complicated when you consider questions like how much an individual would be willing to pay for social media or other products as opposed to an ad-supported version. Similarly, research has shown a “privacy paradox” where revealed preferences for privacy tend to be weaker than stated preferences.

If policymakers are to consider legislation around data privacy, they should focus on real and widely agreed-upon harms, not merely expressed preferences. This approach prevents a shift toward a more European “privacy fundamentalism” that is more likely to result in conflicts both with other rights, like speech, as well as create a static approach that could deter innovation including those that may improve privacy.

Understanding the problems of a patchwork approach

The continuing, emerging patchwork of data privacy laws at a state level is likely to lead to both increased costs and confusion. This is true not only for the businesses that handle data but also for consumers.

A state-by-state approach makes it uncertain for both innovators and consumers what may or may not be done with their data. For consumers, this can create confusion about why certain products or features may not be available in their state or what rights they have when it comes to obtaining or correcting their data online. Particularly for small businesses, a state-by-state approach is likely to significantly raise costs as new compliance concerns arise in each state. In some cases, this may result in applying the most restrictive standard necessary, but in other cases, it may require development of specific features to comply. In either case, again both consumers and innovators lose out. Consumers may find themselves losing features because of standards imposed by legislatures in other states and innovators may find themselves focusing on compliance rather than the improvements that best serve their customers.

Far from being the second-best solution, it is almost inevitable that proposals will eventually conflict with one another which makes it impossible to comply with all such state laws. The most obvious example of this would be if one state chooses an opt-out model while another chooses an opt-in model, but many other conflicts could arise around issues such as data minimization or retention.

Given the potential and likelihood for conflicts and the burden on out-of-state businesses, a state-by-state approach also should give rise to dormant commerce clause concerns. The interstate (and international) nature of data means that a federal standard should be considered constitutionally necessary in this case.

Conclusion

The 2022-2023 session saw a doubling of the number of states with consumer data privacy laws. While policymakers may feel they are responding to constituent concerns, the patchwork approach remains problematic for both innovators and consumers.

Nicholas Anthony

Several members of Congress have introduced legislation in response to the concerns that have been voiced over central bank digital currency, or CBDC. To help keep everyone up to speed, the table and paragraphs below offer an overview of the bills that have been introduced during the 118th Congress.

Editor’s Note: The Cato Institute’s Center for Monetary and Financial Alternatives has produced research demonstrating the net risks of CBDCs, and proposed ways for Congress to protect Americans from CBDCs. The Cato Institute does not support any particular piece of legislation. The information below is an educational resource only.

No CBDC Act

Introduced by Senator Mike Lee (R‑UT), the No CBDC Act would prohibit both the Federal Reserve and the Department of the Treasury from minting or issuing a retail CBDC (i.e., a CBDC that would be used directly by individuals). The bill would also prohibit intermediated CBDCs where financial institutions are enlisted to maintain customer accounts on behalf of the government. Furthermore, the bill prohibits the Federal Reserve from using a CBDC on its balance sheet which sets the groundwork for taking wholesale CBDCs off the table. Finally, the bill would also prohibit the Federal Reserve from using a CBDC to conduct monetary policy.

Co‐​sponsors: Senators Ted Cruz (R‑TX), Mike Braun (R‑IN), and Rick Scott (R‑FL)

CBDC Anti‐​Surveillance State Act

Introduced by Representative Tom Emmer (R‑MN), the CBDC Anti‐​Surveillance State Act would prohibit the Federal Reserve from issuing a retail CBDC. The bill would also prohibit the Federal Reserve from using a CBDC to implement monetary policy. Finally, in response to the Federal Reserve’s research and development on CBDCs, the bill would require the Federal Reserve to report the status of CBDC pilot programs to Congress on a quarterly basis.

Co‐​sponsors: Representatives French Hill (R‑AR), Warren Davidson (R‑OH), Mike Flood (R‑NE), Ralph Norman (R‑SC), Byron Donalds (R‑FL), Andy Biggs (R‑AZ), Barry Loudermilk (R‑GA), Pete Sessions (R‑TX), Young Kim (R‑CA), Nancy Mace (R‑SC), Scott Fitzgerald (R‑WI), Bryan Steil (R‑WI), Don Bacon (R‑NE), Mike Bost (R‑IL), Jefferson Van Drew (R‑NJ), August Pfluger (R‑TX), Anna Paulina Luna (R‑FL), Kevin Kiley (R‑CA), Rudy Yakym (R‑IN), Jeff Duncan (R‑SC), Debbie Lesko (R‑AZ), Josh Brecheen (R‑OK), Glenn Grothman (R‑WI), William Timmons (R‑SC), Bill Posey (R‑FL), Marjorie Taylor Greene (R‑GA), David Rouzer (R‑NC), Michael Cloud (R‑TX), Austin Scott (R‑GA), Mike D. Rogers (R‑AL), Mary E. Miller (R‑IL), Christopher H. Smith (R‑NJ), David Valadao (R‑CA), Keith Self (R‑TX), Guy Reschenthaler (R‑PA), Ronny Jackson (R‑TX), Paul A. Gosar, (R‑AZ), Pat Fallon (R‑TX), Randy Weber (R‑TX), and Jake LaTurner (R‑KS)

S. 887

Introduced by Senator Ted Cruz (R‑TX), S. 887 would prohibit the Federal Reserve from offering a CBDC directly to individuals (i.e., a retail CBDC), maintaining accounts for individuals (i.e., FedAccounts), and offering any products or services directly to individuals. In short, it seems that the bill seeks to block attempts to have the Federal Reserve get into the business of commercial banking.

Co‐​sponsors: Senators Mike Braun (R‑IN), Chuck Grassley (R‑IA), and Rick Scott (R‑FL)

Power of the Mint Act

Introduced by Representative Jake Auchincloss (D‑MA), the Power of the Mint Act would prohibit both the Federal Reserve and the Department of the Treasury from issuing a central bank digital currency. The bill makes it explicit that any decision to move forward with a CBDC must first be authorized by Congress. Notably, the Power of the Mint Act is the first bipartisan piece of legislation to address CBDCs during this Congress—Representative French Hill (R‑AR) joined Representative Auchincloss on the House floor as an original cosponsor during the bill’s introduction.

Co‐​sponsors: Representatives French Hill (R‑AR) and Barry Moore (R‑AL)

Digital Dollar Pilot Prevention Act

Introduced by Representative Alex X. Mooney (R‑WV), the Digital Dollar Pilot Prevention Act would prohibit the Federal Reserve (both the board and regional banks) from establishing pilot programs to test CBDCs without approval from Congress. Given recent concerns about CBDC cronyism, the bill also makes a point to explicitly state that the Federal Reserve can not circumvent this prohibition by partnering with the private sector to contract out CBDC development.

Co‐​sponsors: Representatives Pete Sessions (R‑TX), Bill Posey (R‑FL), Ralph Norman (R‑SC), Byron Donalds (R‑FL), John W. Rose (R‑TN), Andrew Ogles (R‑TN), Jeff Duncan (R‑SC), W. Gregory Steube (R‑FL), Randy Weber (R‑TX), Glenn Grothman (R‑WI), Ronny Jackson (R‑TX), Victoria Spartz (R‑IN), Harriet M. Hageman (R‑WY), Bob Good (R‑VA), Josh Brecheen (R‑OK), Nicholas A. Langworthy (R‑NY), Keith Self (R‑TX), and Thomas Massie (R‑KY)

Conclusion

With so many proposals on the table, the next steps for policymakers will likely involve debates over where to draw the lines on the distinctions between the different bills. Ideally, Congress will prevent both the Federal Reserve and the Treasury from creating a CBDC in retail, intermediated, and wholesale forms.